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Investment Tips From The Legends Of Wall Street

- Alan Lavine and Gail Liberman

If it's any consolation, the greatest investors of all time, like us, have had their ups and downs. They made and lost millions. But in the end, they came out way ahead. Here are what some likely would say to us if they were here today.

  • Benjamin Graham, the father of modern security analysis. Never keep more than 80 percent of your assets in stocks. And never keep less than 20 percent in bonds and cash. The more stock prices rise, the more you take in profits and invest in bonds. The lower stock prices go, the more you take profits in bonds and invest in stocks. Don't know what to do? Keep your powder dry and invest in U.S. Treasury bills.

  • Bernard Baruch, the most successful early 20th century investor and banker. Don't invest because you hope stock price will rise. Invest based on economic facts that point to improved business, higher corporate profits and stock prices. Keep a close watch on economic indicators, such as job growth, employment, factory orders, gross domestic product, trends in corporate profits and favorable legislation to business. Once you have the facts, you can invest in stocks. Bonds are a hedge against stock market losses.

  • Andre Meyer, legendary investment banker, who helped corporations raise money during their expansion in the 1960s. Meyer made hundreds of millions of dollars in investment banking fees, helping corporations to merge, issue bonds and offer stock. But he never took any risks with his own money. He invested his millions in U.S. Treasury bonds. His philosophy: Make more money from work and put away more in safe investments. If you save more money, you needn't risk your savings.

  • Paul Cabot, original manager of the State Street Investment Trust Fund, launched in 1926. Always find out everything there is to know about a company. Buy a company that has a catalyst for change, such as new product. In his day, that was heavy manufacturing industries and the railroad. Cabot escaped much of the Depression-related 1929 stock market wrath and returned to the stock market in the mid-1930s. At that time, he saw some inflation, and figured businesses finally could raise prices. His mutual fund showed a slight positive return over 10 years during the depression.

  • John Maynard Keynes, father of modern economics. The central principal to investing is to go contrary to general opinion. If everyone is buying something, the stock price is too high. It's too late to invest. Carefully select a few investments, based on cheap stock prices in relation to higher future earnings. Own highly undervalued stocks for the long term through thick and thin until the companies' fortunes materialize. Also, balance your investments with bonds and gold to hedge against inflation.


    Alan Lavine and Gail Liberman are husband and wife columnist and authors of The Complete Idiot's Guide To Making Money With Mutual Funds, (Alpha Books). Al and Gail's new book is Rags to Retirement, (Alpha Books).

    To read more columns, please visit the column archive.

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